The Unnatural Selection of Male Entrepreneurs

Although entrepreneurship rates vary from country to country, anywhere in the world there are many more male than female entrepreneurs.

Why?

First, women are financially more risk averse. The odds of success for start-ups are lower than 15%, so you need a fairly big appetite for risk to launch a new venture, especially when the economy is solid.

Second, women are typically more patient than men. As a consequence, they tend to tolerate incompetent, abusive, and bullish bosses for a longer time, instead of quitting their jobs to launch a business.

Third, there is yet to be a market that is as friendly to female as male entrepreneurs. Indeed, women are universally disadvantaged when it comes to raising capital from VCs, obtaining loans, and impressing shareholders.

As a result, our definition of entrepreneurship is male-normative, and women’s potential for entrepreneurship is judged in terms of their resemblance to male entrepreneurs. This only continues to incentivize behavior that is more impulsive, aggressive, or overconfident.

However, many typically “feminine” personality characteristics are essential for successful entrepreneurship. For example, risk aversion protects entrepreneurs from failure by highlighting potential threats and anticipating problems. Unsurprisingly, higher risk-taking increases the propensity to launcha business, but does not correlate with greater start-up success. In fact, conscientious and prudent founders tend to do significantly better. Likewise, being more patient and less volatile is beneficial not only when you work for others, but also when you are running your own business.

Importantly, the women who do become start-up founders are overwhelmingly happy with their choice: they report higher levels of job satisfaction and a better work-life balance, even when they work more to earn less. And business ownership is an important avenue through which women can break through the glass ceiling encountered within established organizations: as one would expect, societies that support female entrepreneurship have higher rates of self-employed women and female business owners.

And yet the gender bias in entrepreneurship handicaps female entrepreneurs despite their competence, while rewarding male entrepreneurs despite their flaws, and sometimes because of them. Since the achievement gap between men and women entrepreneurs is not a function of differences in potential, but an unnatural selection process that undermines competence, meritocracy, and success, the question becomes: how can we stop the unnatural selection of male entrepreneurs?

First, we can debunk the myth of entrepreneurship as masculine. Psychological research has shown that even when we know stereotypes are inaccurate, they still affect our decisions. Uprooting the stereotype that men are naturally better suited for entrepreneurship would encourage competent women and discourage incompetent men. It would also improve the reputation of all entrepreneurs, as most of the dark-side characteristics associated today with entrepreneurship are male-normative: e.g., greed, geekiness, antisocial tendencies, and megalomania.

Second, we can bet on competence rather than confidence. Just like a lack of barriers for incompetent (but confident) men explains the under-representation of female leaders, a lack of barriers for overconfident entrepreneurs explains the higher proportion of male-led start-ups. The solution, then, is for investors to bet on actual rather than self-perceived talent: this may not only increase the number of women entrepreneurs, but also the average odds of success for start-ups: firms managed by female CEOs have higher performance than firms managed by male CEOs. In addition, gender diversity in senior management boosts company revenues and profitability. For example, a study of Fortune 500 firms showed that companies with more female executives outperform their sector competitors in terms of profitability and valuation. (And yet, C-level women are still paid less than their male counterparts.)

Finally, we can remove the financial constraints that are holding female entrepreneurs back. Although entrepreneurship is often an antidote to the glass ceiling in corporate management, there remains a financial glass ceiling for female entrepreneurs. Since sex differences in entrepreneurial potential and interests are negligible, merit-based funding should not have an adverse impact on women. However, studies show that female entrepreneurs face tighter credit availability, and sometimes higher interest rates, than men do. Reassuringly, research also shows that although women are substantially less likely than men to seek financial backing from angel investors, they are equally good at obtaining it.

And an important note: gender inequality is not always a result of the battle between men and women. Female lenders and funders are less likely to give credit to female than male entrepreneurs, too.

In conclusion, the selection of male entrepreneurs is as unnatural as the rejection of female entrepreneurs. It is both possible and necessary to boost female entrepreneurship rates. This should not be seen as an act of positive discrimination towards women, but an attempt to stop positive discrimination in favor of men.